Common Front for Social Justice

For Immediate Publication

June 4, 2008.

PRESS RELEASE by Janice Harvey

Tax reform: Shifting the burden from rich to poor

There is a well-orchestrated campaign afoot, designed to shift even more wealth from the poor and middle-class to corporations and the well-to-do, all in the name of attracting people and business investment to New Brunswick. It is called tax reform, and it is the latest weapon in the neo-liberal economic arsenal designed to free the "free market" from those levers of government meant to redistribute wealth throughout Canadian society.

This week Premier Graham will release a discussion paper on tax reform, written by Jack Mintz, formerly of the C. D. Howe Institute, a right wing think tank, now with the equally conservative University of Calgary. Mr. Mintz is being described as an objective expert free of political agendas and therefore willing to tell the truth about how best to collect public rents from private wealth in order to support public services. 

While Mr. Mintz is indeed not accountable to New Brunswickers as are our politicians, he is not an objective observer. He and Frank McKenna, who has been pushing tax reform in his recent public appearances, are purveyors of an elitist ideology or worldview which believes religiously in the power of market capitalism to deliver economic wealth to all.

This neo-liberal economic agenda assumes that the rising tide of wealth created by the free market lifts all boats. What we know, however, is that the rising tide of wealth only lifts the yachts while stranding all smaller boats (a metaphor borrowed from an unknown source). 

The proof of this is in the cold, hard numbers released by Statistics Canada not more than a month ago (global statistics show the same trend). As national policy has increasingly embraced the neo-liberal formula of free trade, privatization and deregulation, the wage gap between between the richest and poorest people in Canada has grown. Nationally, incomes at the bottom have been falling; incomes in the middle have been stagnant; and incomes at the top have been increasing, especially since the slash-and-burn reductions in social programs and dramatic tax-cuts for the wealthy began in 1995.

In New Brunswick, from 1985 to 2005, the lowest earning 20 percent saw their average after-tax income (in constant dollars) drop from $11,600 to $11,400. The highest earning 20 percent, meanwhile, enjoyed an after-tax increase from $80,000 to $90,600, the result of tax cuts and shelters. Over those 20 years, the percentage share of total after-tax income that went to the lowest 20 percent of income earners remained stagnant at five percent; the share enjoyed by the middle 60 percent of income earners fell from 55 percent to 50 percent. Meanwhile, the share for the highest earning 20 percent rose from 40 percent to 45 percent. In short, taxation and social policies have shifted provincial wealth from the middle to the top while the bottom has remained stagnant, propped up by minimal government income supports and other transfers.
This pattern will worsen if Jack Mintz’s proposals are accepted. His discussion paper will argue for cuts in income and corporate taxes, to be replaced by consumption taxes levied on goods and services. This will hit the poor hardest. They pay the least or no income tax now, and so will reap the least benefit from income tax cuts. Yet they will pay new consumption taxes on goods and services at the same rate as the millionaire.

In social democracies such as Canada, the income tax system is the primary means of ensuring social equity and social cohesion by levelling somewhat the peaks and troughs of market-generated income distribution. It is called a progressive tax system, whereby those who have more pay a higher share of the bill for public services through graduated income tax brackets. Consumption taxes levied on goods and services as they are purchased are called regressive because everyone pays the same tax rate or fee regardless of ability to do so.

This shift will be touted as revenue neutral – the total amount of money the government takes in will be the same. However, the proportional burden of taxation – that is, the proportion of personal income spent on taxes – would shift dramatically from those with the greatest ability to pay to those with the least. We are already on that track, as the growing after-tax income gap shows. If we take this next step, the gap will continue to grow, poverty will worsen, and New Brunswick will look more and more like those low-tax states where the poor live in ghettos and the rich in their gated enclaves.

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Janice Harvey is a freelance columnist and can be reached by e-mail at waweig@nbnet.nb.ca.